Aussies beating us to the bank

Owning a house across the ditch could cost you less in the long term, as Australian mortgage interest rates are well below those of local banks.

But it seems the Kiwi banks are not to blame for our higher interest rates: the issue is instead our poor saving and big-spending habits.

Bernard Hickey, of interest.co.nz, said our higher mortgage rates were caused by our smaller population, the way we spend our money, and how much overseas investors are willing to risk in New Zealand.

"It's all our fault," he said.

Our overseas credit rating, as set by Standard & Poor's, the world's provider of independent credit ratings, is listed as a AA+, compared with Australia's AAA rating.

"We don't save as much as Australia and our economy is smaller and our debt is higher," Hickey said.

"We're not as safe as Australia, therefore international investors who have lent us this money will want a higher return."

Standard & Poor's is at present reviewing our credit rating, and Hickey said it was deciding whether to downgrade it. He described the review process as like competing in an international beauty contest: "Bill English and John Key are parading in front of the judges to try to keep us in the pageant."

The chief economist for the BNZ Bank, Tony Alexander, said New Zealanders paid high mortgage rates because we were prepared to pay them, as a result of our lack of saving and our high debt levels.

"Kiwis ... pay interest rates that people overseas are not prepared to pay."

Alexander said we had one of the worst household debt levels in the OECD. "We need New Zealanders to basically save more money."

Our isolation and our farming-based economy made it harder for our country to attract investment, Alexander added.